Should I Increase My Credit Limit?

The easy answer to this question would be a HARD NO. My dad’s warnings about overspending still echo in my head like the Ghost of Christmas Past.

But honestly? It depends.

When I got my first credit card a couple years ago, I didn’t really care what my limit would be. I had no income of my own, so I was really just using my credit card on the occasional iced capp to keep my account alive.

All of that changed when I got my first job. Then I had the freedom to spend on whatever I wanted, without the guilt of leeching off my parents.

So far, I haven’t needed a higher limit. But just because I’m not making big purchases now doesn’t mean I won’t in the future — and as it turns out, there are actually money-saving benefits to raising your credit cap.

Here’s what you need to think about before accepting or requesting an increase.

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You can score some savings

Here’s the thing: You don’t actually need to spend more when you raise your credit limit. So then what would be the point?

As soon as you get a credit card or loan, Canada’s credit reporting bureaus start watching you. These are the companies that calculate your credit score and give it to lenders and landlords and employers — anyone interested to know how responsible you are with money.

You look good when you show that you can resist emptying your credit in one go. So if you raise your limit and keep your spending the same, your credit utilization — the percentage of your overall credit you’re currently using — drops. And that will boost your credit score.

A higher score makes lenders feel safe, so they’ll offer you lower interest rates when you need to finance a car or buy a home. You just saved a bunch of money without lifting a finger!

If you’re not sure where your credit score stands, or you want to monitor it in the future, you can use any number of free online services. I’m currently using Borrowell, which tells me my score, keeps me updated on a monthly basis and gives me custom advice to improve my credit.

You can get more freedom and security

The main reason people usually choose to increase their credit limit, however, is undoubtedly the ~spending power~.

Once you’ve moved out and need to buy your own groceries, pay rent and do other costly Adult Things, you need a lot more wiggle room on your credit card. Plus, if you’re able to make major purchases on a credit card, you can earn reward points like Air Miles or cash-back opportunities. 

Even if you’re not planning to change your buying and borrowing habits, it’s always good to be prepared for the unexpected. Trust me, if your car breaks down or you need some surprise dental work, a higher limit would be super useful. 

*painful flashbacks to the time my card was declined at the dentist and I had to ring up my dad in shame*

You can really shoot yourself in the foot

It’s important to recognize that a high limit isn’t for everyone.

First of all, you need to know yourself. Seriously. You know who you are and how much self-control you possess. Are you really responsible enough to handle more credit? 

It’s so easy to give into temptation when you know you have the room to spend more. Personally, I’m a sucker for online shopping and cute clothes. My friends have literally dragged me away from Forever 21 (RIP) after I asked them to save me from buying another lace blouse. 

If you don’t manage your spending and start carrying a big balance from month to month, you lose a lot of money to interest and risk sinking into debt.

The other, lesser-known issue with a credit limit increase (especially if you request it yourself) is that it can temporarily dent your credit score. Why? Your card issuer might choose to pull your credit history first — a “hard inquiry” — and that pulls your score down.

Although, if you take my advice and keep your credit utilization low, you’ll get it back up again in no time.

So, should you raise your credit limit? 

I can’t actually answer that for you. Like I said, it all depends on your financial situation and, of course, your self control when it comes to spending. 

I haven’t needed to up my credit limit yet, but I probably will soon. At that point, I’ll have to resist those sales notifications from my H&M app more than ever, but it’ll be well worth it if I can give my credit score a nice little boost.

If you’ve got a steady income and can manage your credit wisely, bumping up your limit would be the way to go, especially if your issuer is making an offer. However, if you think the temptation will be too strong to ignore, then it’s probably best you leave your limit alone.

Just listen to the little voice in your head. It knows what to do.